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Do I need to file Form 1041 for a trust if the only property in the trust (my dad's house) was sold for less than its value at my dad's death (i.e., a capital loss)?
My dad transferred his house to a trust during his lifetime. After he died, I (as trustee) sold the house for significantly less than its value on the date of his death (i.e., a capital loss). The rules for Form 1041 state that a trust needs to file a return if it has "gross income of $600 or more (regardless of taxable income)." The trust had no other income during the year.
My question is: Does the trust need to file Form 1041? In other words, does the trust have gross income if it only has a capital loss? If the answer is no, and I do not have to file a return for the trust, is there any reason for why I should anyway? Thank you in advance.
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Do I need to file Form 1041 for a trust if the only property in the trust (my dad's house) was sold for less than its value at my dad's death (i.e., a capital loss)?
"..... is there any reason for why I should anyway?"
There absolutely is a reason you should file a 1041; you can pass that capital loss through to the beneficiary(ies).
Further, you will need to file a 1041 if you receive a tax reporting form, such as a 1099-S. Despite the fact that the filing threshold is not met, the IRS will not know the basis of the property unless you report it on a 1041.
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Do I need to file Form 1041 for a trust if the only property in the trust (my dad's house) was sold for less than its value at my dad's death (i.e., a capital loss)?
"..... is there any reason for why I should anyway?"
There absolutely is a reason you should file a 1041; you can pass that capital loss through to the beneficiary(ies).
Further, you will need to file a 1041 if you receive a tax reporting form, such as a 1099-S. Despite the fact that the filing threshold is not met, the IRS will not know the basis of the property unless you report it on a 1041.
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